Tax Law Rewrite : The Way Forward: Chapter 1: Introduction

1. This consultative document sets out how we believe the tax
law rewrite project should be taken forward and asks for your
comments and views by 1 November 1996.

Background

2. In his Budget Statement last November, the Chancellor of the
Exchequer announced the project to rewrite tax legislation in
clearer, more user-friendly language. He said:

"Tax law has become too long and too complicated. Some experts
have described it as incomprehensible. The Inland Revenue will
shortly be publishing a report on tax simplification. We will
propose that the Revenue tax code is rewritten in plain English
a major task."

3. Our report was published on 12 December ("The Path to
Tax Simplification" and "The Path to Tax Simplification
a Background Paper"). It set out in detail the reasons
why a rewrite was needed and what it would involve. The report
included examples of rewritten legislation.

4. Commenting on the report, the Financial Secretary to the Treasury
said:

"Preparatory work will now go ahead in full consultation
with the private sector on the main proposal. This is to rewrite
over about five years most of the primary legislation on the Inland
Revenue taxes in simpler, more user-friendly language, which will
be easier for everyone to understand. It will of course be some
time before we begin to see the full benefits of this major project
... I am convinced that the rewrite programme, when complete,
will reduce the compliance costs which the tax system imposes,
in one way and another, on every business and taxpayer in the
country."

5. In both its "Interim Report on Tax Legislation" (November
1995) and its "Final Report on Tax Legislation" (June
1996) the Tax Law Review Committee (TLRC) also concluded that
a rewrite was needed. We have taken account of their reports
in preparing this consultative document, and of our informal contacts
with a wide range of tax professionals and others since the rewrite
project was announced.

The rewrite project

6. The scope of the rewrite project was described in "The
Path to Tax Simplification" and its Background Paper. The
main points are as follows.

7. The project is to rewrite most of the existing primary legislation
on Inland Revenue taxes that is, Income Tax, Corporation Tax,
Capital Gains Tax, Inheritance Tax, Petroleum Revenue Tax and
Stamp Duties.

8. The rewrite will use several techniques to make the legislation
easier to understand, including plain language, rationalisation
of definitions, reordering and renumbering, omitting outdated
or unnecessary material, and better signposting and layout. The
examples in last December's Background Paper show the substantial
improvement which can result.

9. The project will be led by the Inland Revenue, but will proceed
on the basis of full consultation with the representative bodies
and taxpayers generally. In addition there will be direct private
sector involvement in the project, to ensure that taxpayers' concerns
and the concerns of the tax professions are taken into account
throughout.

10. We estimate that completing the rewrite will take around five
years. It will entail costs to both the public and private sectors
which the Government believes will be substantially outweighed
by the long term benefits, to business and self-employed taxpayers
in particular. However, when the first tranche of the rewrite
is completed, there will be a 'stocktaking' to assess whether
or not the aims of the project are being met and to give the opportunity
to modify the project as necessary to achieve the best results.

11. In the course of rewriting existing legislation, we expect
that there will be cases where a real improvement can only be
achieved by simplifying minor rules, subject to the approval of
Ministers and Parliament. These minor policy changes apart, the
project is not about simplifying the policy underlying the Inland
Revenue taxes. Treasury Ministers will continue to consider tax
policy changes, including proposals for policy simplification,
in the normal
way. However, the rewrite should make it easier to identify where
there is a case to be made for policy reform.

12. Nor is the project directly about improving Finance Bills
in the short term. As the rewrite proceeds it will produce clearer
legislation which will make it easier to produce clear amendments.
But other proposals for improving Finance Bills will be pursued
separately. In particular, we will shortly be consulting about
improved explanatory material for Finance Bills.

This consultative document

13. A successful rewrite needs careful planning and the close
involvement of those who use the law. The rest of this consultative
document sets out our proposals, all of which are open to change
and modification in the light of reactions to them.

14. The next four chapters are about what the finished product
might look like:

Chapter 4 discusses the way tax legislation
is ordered overall and how that could be improved

Chapter 5 discusses the case for a new numbering
system for tax legislation.

15. The following four chapters discuss how we could go about
creating the finished product:

Chapter 6 discusses how the ordering and
numbering systems chosen can best be implemented, and introduces the idea
of a 'ghost code'

Chapter 7 seeks views on whether the rewritten
law should be brought into effect in stages or all at once in a 'Big
Bang', and how this issue interacts with some of the other issues discussed
in this document

Chapter 8 discusses the order of rewriting,
in particular which area or areas should be tackled first

Chapter 9 discusses a key issue: how best
to involve users and the tax professionals fully in the rewrite, through
consultation and by taking part directly in the work. It sets out Ministers'
decisions on a steering group for the project. It also covers the arrangements
for stocktaking at the end of the project's first phase.

16. Finally,

Chapter 10 summarises the other chapters
and lists the points on which we seek comments and views.

Our general approach

17. The purpose of the project is to make our primary tax legislation
clearer and easier to use. The following chapters say how we
propose to achieve that. But first we need to be clear about
who the users are.

18. Most obviously they are taxpayers themselves. Many taxpayers
doubtless rely on explanatory material rather than the legislation
itself. But we believe that they would use the legislation rather
more if it were made more accessible to them. And by making our
legislation clearer, the rewrite will lead to clearer explanatory
material, more easily produced, for taxpayers who do not consult
the law directly. In many cases, the rewritten legislation should
be clear enough to be used unaltered in guidance leaflets and
other explanatory material.

19. Second, there is a significant body of people and institutions
employers being the prime example on whom the law imposes specific
obligations in addition to those they have as taxpayers.

20. The third category of users is those acting for the taxpayers
in a professional capacity, be they accountants, lawyers or other
professionals. They probably constitute one of the main direct
users of tax legislation at present.

21. Fourth, there are those who apply, enforce and interpret tax
law, a category ranging from Revenue staff to judges in the higher
Courts.

22. Finally, there is a small but important category, with Ministers
and Parliament at the core, concerned primarily with changes to
tax law.

23. This is a very disparate collection of users with differing
needs and differing levels of expertise. So our aim is not
to make all tax law accessible
to everyone. Rather we will try to tailor the particular area
of law being rewritten to those who will actually use that law.

24. When preparing this consultative document, it is these groups
of users, and how they use the law, which we had in mind.

Response invited

25. You are invited to comment on the questions raised in this document and
summarised in Chapter 10. (If you wish, your
comments will be treated in confidence.) We would be grateful for comments
by 1 November 1996 to:

27. After the comments have been received, the Government will
publish its reactions to them and its conclusions on the issues
raised in this document, and how it will proceed with the next
stage of the project.